Title
Olivares vs. Sarmiento
Case
G.R. No. 158384
Decision Date
Jun 12, 2008
Respondent accused Boteros of forging deeds to sell her property; SC upheld the sale, ruling it valid, not an equitable mortgage, and petitioners as buyers in good faith.
buyers in good faith
presumption of regularity
notarized documents

Case Summary (G.R. No. 158384)

Factual Background

The property was described as a 230-square meter parcel of residential land, covered by TCT No. T-86397, registered in respondent’s name. The DBP loan was obtained on 18 August 1976, and respondent mortgaged the land as security. Respondent and Manuel allegedly failed to pay the monthly amortizations, placing the mortgaged property at risk of foreclosure.

Respondent later claimed that in 1979 she obtained a loan of P35,000 from Boteros to pay her DBP obligation and prevent foreclosure. She asserted that instead of receiving the loan proceeds, she authorized Boteros and his niece, Segunda Planta (Planta), to pay the DBP loan for her. Respondent then accused Boteros and Planta of forging her signatures in two deeds of sale that purported to show that respondent and Manuel sold the land and house to Boteros.

Boteros, however, testified that respondent offered to sell the property to him on the condition that he pay her DBP loan and interest. Boteros claimed he accepted the offer, paid the DBP loan in full, and caused the issuance of a DBP certification of mortgage cancellation dated 28 June 1979. The transaction was documented through a notarized Deed of Definite Sale dated May 1979, signed by respondent and Boteros, with a stated consideration of P2,000 in cash and the assumption by Boteros of respondent’s P12,000 loan from DBP plus the interest due.

After Boteros fully paid the DBP loan, respondent and Boteros executed another document, a Deed of Absolute Sale dated 2 July 1979, which stated that respondent and Manuel were selling the property to Boteros for P25,000. On 24 July 1979, the Register of Deeds cancelled TCT No. T-86397 and issued TCT No. T-99121 in Boteros’ name.

On 7 January 1984, Boteros sold the property to spouses Juan Olivares and Dolores Robles for P27,000. Petitioners later testified that before buying from Boteros, Olivares approached respondent, and respondent allegedly confirmed that she already sold the property to Boteros. On 3 April 1985, the Register of Deeds cancelled Boteros’ title and issued TCT No. T-115,672 in petitioners’ names. After the title transfer, petitioners demanded respondent vacate. When respondent and her family continued to stay, petitioners filed an illegal detainer case in the Municipal Trial Court of Oton. On 14 October 1988, the MTC ordered respondent and Manuel to vacate and deliver possession to petitioners.

Meanwhile, respondent filed civil actions attacking the earlier sale. On 7 December 1984, respondent filed a civil case for recovery of possession, ownership, annulment of title, and damages against Boteros and Planta (Civil Case No. 16177), but it was dismissed without prejudice on 23 April 1986. On 26 September 1986, respondent filed another civil complaint with the Regional Trial Court of Iloilo for recovery of ownership, annulment of title, and damages against Boteros, Planta, and petitioners, docketed as Civil Case No. 17242.

Trial Court Proceedings

On 1 March 1993, the RTC Branch 36 rendered its decision dismissing respondent’s complaint. The RTC upheld the validity and genuineness of the Deed of Absolute Sale executed by respondent in favor of Boteros, who subsequently sold to petitioners.

The RTC reasoned that respondent’s mere denial of signing the deeds, uncorroborated by other evidence, could not overcome the notarized deeds of sale. On the validity of the Deed of Absolute Sale, the RTC found that the essential requisites of a valid contract were present: consent, evidenced by respondent’s signature; object certain, referring to the parcel covered by TCT No. T-86397; and consideration, stated as P25,000. The RTC also considered that the signatures were confirmed to be genuine by the National Bureau of Investigation and that the deeds were executed before a notary public with witnesses.

The RTC disposed the case by dismissing respondent’s complaint and ordering respondent to pay defendants moral damages, attorney’s fees, and litigation expenses.

Appellate Proceedings and the Court of Appeals’ Reasoning

On appeal, the Court of Appeals reversed the RTC. The CA declared several deeds null and void: the Deed of Definite Sale from respondent to Boteros (dated May 1979), the Deed of Absolute Sale from Manuel and respondent to Boteros (dated 2 July 1979), and the deed of sale from Boteros to petitioners (dated 7 January 1984). The CA ordered respondent restored in possession. The CA also required respondent, within thirty (30) days from finality, to pay petitioners the amount Boteros paid to DBP (P21,009.62), with legal interest computed from the date of the transaction until respondent was ejected in 1989, plus costs. If respondent failed to pay, the property would be sold at public auction and proceeds applied to mortgage debts and costs.

Substantively, the CA held that the transaction between respondent and Boteros was not a genuine sale but an equitable mortgage. The CA relied on two main circumstances: the CA viewed the P25,000 consideration as unusually inadequate for the land, and it concluded that respondent—whose educational level was only grade 3 and who could not understand English—could not have fully understood the deed’s contents because the deed should have been fully explained under Article 1332 of the Civil Code.

The CA further relied on respondent’s continued possession of the property even after the alleged sale, reasoning that such persistence in possession fit within Article 1602 of the Civil Code provisions that allow a presumption of equitable mortgage.

Because the CA found the transaction to be only an equitable mortgage, it ruled respondent could still recover the property from petitioners who, according to the CA, were not buyers in good faith. The CA pointed to petitioners’ alleged awareness that respondent continued to occupy the property, and thus petitioners should have inquired before buying. It also reasoned that because Boteros was not the true owner under the CA’s theory, he had no right to sell.

The Parties’ Contentions and Issues Raised

Petitioners challenged the CA’s treatment of evidence and its legal conclusions. They asserted that the CA could not disregard the RTC’s factual findings by relying on respondent’s denial and uncorroborated testimony over the testimony of witnesses and the notary public. They also argued that the CA’s findings were speculative and failed to cite the specific evidence supporting the reversal.

On the substantive issues, petitioners contended that the Deed of Definite Sale could not properly be construed as an equitable mortgage so as to render it null and void rather than reform the instrument. They also questioned the CA’s authority to order a redemption by the mortgagee and argued that they could be considered buyers in good faith because they relied on the clean title and the deed of sale executed by respondent.

The Court framed the pivotal matter as the determination of the real nature of the transaction between respondent and Boteros, particularly whether it was a sale or an equitable mortgage.

Supreme Court’s Ruling: The Transaction Was an Absolute Sale

The Supreme Court granted the petition. It found merit in petitioners’ position and reinstated the RTC.

Legal Basis and Reasoning

The Court rejected respondent’s claim that her signatures were forged. It held that respondent failed to prove forgery by clear and convincing evidence. The Court noted that the Office of the Provincial Fiscal of Iloilo dismissed respondent’s falsification complaint against Boteros and Planta for insufficiency of evidence.

The Court also considered the NBI handwriting examination dated 25 February 1985, which stated that respondent’s signature on the Deed of Absolute Sale dated 2 July 1979 and respondent’s sample signatures were written by the same person. The NBI report did not provide a definite conclusion regarding Manuel’s signature because of insufficient and inappropriate basis for comparative examination.

In addition to the handwriting examination, the Court relied on the testimonies of persons who witnessed the signing. One witness, Planta, testified that she saw respondent and Manuel sign the Deed of Absolute Sale. Atty. Manuel Roa, the retired judge and notary public who notarized the deeds, testified that he was present when respondent signed the Deed of Definite Sale and the Deed of Absolute Sale. For the Court, these circumstances supported the notarized deeds’ credibility.

With the signatures treated as genuine, the Court affirmed the RTC’s contractual analysis. It held that the essential requisites for a valid contract were present: consent evidenced by signatures, object certain referring to the specific property, and consideration of P25,000. The Court further emphasized that the notarized deed was a public document entitled to the presumption of regularity, and its validity must be upheld absent clear and convincing evidence to the contrary.

The Court also rejected respondent’s attempt to recast the transaction as a loan. It held that respondent’s bare assertion that the agreement was merely a P35,000 loan lacked substantiation. There was no written instrument evidencing a loan arrangement. The Court found it improbable that Boteros—aware of respondent’s inability to pay the DBP loan—would grant a much larger loan amount of almost triple the DBP loan without requiring written documentation. The Court also noted that respondent admitted she never paid even a single centavo of the alleged loan.

Conversely, the notarized Deed of Definite Sale and Deed of Absolute Sale contradicted respondent’s loan theory. The Court applied the principle that when contract terms are clear and unambiguous, their literal meaning controls. It held that the parties’ intention, as expressed in the written deeds, was decisive.

The Court then squarely addressed the equitable mortgage issue. It reiterated that an equitable mortgage exists when, despite lack of some formality, the transaction reve

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